Gold prices soar as Tanzania’s lockdown on mining continues

Barrick Gold, the part owners of Acacia Mining express concern over the longstanding dispute between Acacia and Tanzanian Government over taxes

Two interesting perspectives of mining environment in Tanzania took place this week.

Gold prices rose, hovering near a more than six-month peak following the weakening of the US dollars and expectation on rise on interest rates.

U.S. gold futures settled $4.10 higher at $1,289.90 per ounce. CNBC reported that this was up 0.25 percent at $1,288.03 per ounce as of 1:40 p.m. EST, having reached $1,298.42 an ounce on Friday, its highest since June 15.

Secondly, Barrick Gold, the largest gold mining company in the world, with its headquarters in Toronto, Canada has expressed concern over a stalemate in Tanzania of its subsidiary Acacia Mining with the Tanzanian government regarding taxes.

The Tanzanian government banned mineral concentrate exports from the country in March 2017 after it reviewed its mining policy to increase its share of profits from mining in the country. Mark Bristow, the CEO of Barrick was interviewed this week by Reuters saying this conflict has destroyed lots of value.

On October 19, 2017, Barrick announced that it and the government had agreed on a framework for a new partnership between Acacia and the government.

The partnership would include the sharing of economic benefits generated by Acacia on a 50-50 basis going forward. However, this framework has yet to be implemented, and the issues are still ongoing.

A new report by DaMina Advisors, a preeminent Africa-Asia focused independent frontier markets political risk research, due diligence, M&A transactions consulting and strategic geopolitical risks advisory firm notes that the situation in Tanzania is likely to ease.

The report notes that President John Magufuli recent appointment of Mining Minster Dotto Biteko likely signals the President’s growing determination to proceed with his original reformation plans “after moderate mining ministers failed to reach an agreement with foreign miners.

“In 2017 Tanzania’s parliament unanimously passed a raft of internationally criticized (but locally popular) laws that provides the government with the necessary legal framework to commence a reign on foreign mining assets.

The 2017 laws and regulations promulgated in 2018 also enshrines Tanzania’s domestic law as supreme over any international dispute or arbitral decision. The new laws also take retroactive effect on existing mining contracts.

The Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 gives the government complete autonomy to dictate the effective outcomes of negotiations with international mining companies regardless of any international juridical decision. It also allows the government to exercise total discretion as to whether it enforces foreign arbitration judgments.

“After two years of unsuccessful negotiations with major foreign miners, Tanzania’s leader may finally be moving to seize control of several foreign owned mining assets,” the hard hitting report says.

Barrick expects more details on the resolution of the Tanzanian issue in the second week of February.

On 4 September 2018, Acacia announced the decision to reduce operational activity at Bulyanhulu Gold Mine. The decision was driven by unsustainable cash outflows at the mine due to the concentrate ban and the operating environment.

The Assessments claim a total of approximately US$40 billion of alleged unpaid taxes and approximately US$150 billion of penalties and interest owed. Acacia disputes these assessments and is considering all of its options and rights.

The Exchange is a financial journal published by Mediapix Limited, a public relations, news and communications organization with its African headquarters in Tanzania and sister operations in Canada, the United States and The United Arab Emirates. The company‘s founders have been instrumental in the media and communication industry in East Africa and have been operational in the region.